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11.01.2005

EU would profit from Turkey’s growth dynamics

  • Young and qualified labour force
  • Maastricht criteria to be achieved rather soon
  • EU can afford accepting Turkey

With the start of EU accession negotiations with Turkey set for 3 October 2005, the country has moved into the limelight. "There was little awareness of the fact that the present Turkish government has been pushing ahead with EU-endorsed reforms at a breathtaking pace for some years now", said Willi Hemetsberger, Member of the Board of Bank Austria Creditanstalt. "From an economic point of view, the European Union would heavily benefit from the growth dynamics Turkey has shown."

Large country with young population
Turkey is a country with a population of around 71m people, which will grow to become the largest of an EU of 29 states by 2025. Although it will get older, the population of Turkey will remain young in comparison to the rest of the EU, with the median age rising to 33 from 25 in 2000, compared to a median age of 48 in Germany for example in 2025.

Around 33% of the Turkish population works in the agricultural sector, yielding around 11% of GDP. This compares unfavourably to the EU of today (5% and 2%, respectively). However, Turkish per capita GDP is close to levels in Bulgaria and Romania. In addition, over 50% of the population have a per capita GDP of € 4,100 compared to € 5,100 for the whole of Poland for example.

Close links to the EU already exist
Currently, Turkey is the 6th largest importer of EU goods, taking in close to EUR 36bn in 2004. Turkey’s trade deficit with the EU will likely come in at around € 7bn in 2004. The government’s restrictive fiscal policy and the central bank’s prudent monetary policy will help bring down the debt/GDP level to the Maastricht 60% mark within the next four years and the inflation rate to levels around 4%.

It’s affordable
According to calculations made by the European Commission and BA-CA’s estimates of Turkish GDP in the next decades, the total net annual cost to the EU of Turkish accession would amount to between 0.07% and 0.21% of EU-25 GDP in the year 2025 or around 19% of the EU budget if it were to increase at the same rate as EU-25 GDP, stated Simon Quijano-Evans, BA-CA’s Turkey analyst. Between now and then however, changes to EU financing can be expected, especially in the area of agriculture, with the EU looking to control expenditures more.

"The EU can afford to take on Turkey as a member", Hemetsberger emphasized. The accession to the EU would not be a one-way process benefiting just Turkey. Indeed, the EU will have the luxury to choose from a young and increasingly qualified workforce in Turkey at a time when its own workforce is diminishing drastically in size.

The Turkish economy will be one of the fastest growing economies in the area in the coming years. Turkey will also become an increasingly important strategic and economic partner due to its abundant water reserves and its geo-political positioning along the path of future oil and gas pipelines. Furthermore, providing the government keeps to its reform path, the country will stand as a country providing incentives for EU governments to keep to their Maastricht fiscal targets.

Enquiries: Bank Austria Creditanstalt International Press Relations
Veronika Fischer-Rief, Tel. +43 (0)5 05 05-82833;
E-Mail: veronika.fischer-rief@ba-ca.com